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A survey by Cambodian microfinancers showed debtors were better off in several respects than those who didn’t borrow from the institutions, MFI officials claimed.Responding to recent concerns over the role of microfinance institutions and the alleged role they played in creating poverty and loss of property in the Kingdom, the Cambodia Microfinance Association on Friday released a study that showed positive outcomes for borrowers in changes in income, assets and the empowerment of women, among others.The Cambodia Institute of Development Study, an independent institution, surveyed 1,876 MFI clients, 568 non-clients and 533 former clients in 15 provinces during the first nine months of 2011.

About 54 per cent of MFI clients saw increases in income in 2010, compared with 32 per cent among non-clients, the survey showed. Nearly 80 per cent of clients had multiple sources of income. Among non-clients, 66 per cent had more than one job.

Cambodia Microfinance Association and Netherlands Development Finance Company funded the survey, of which 80 per cent of the responders were women.

The ability of MFI clients to repay their loans has grown as the industry has matured, association director Bun Mony told the Post Friday.

“During the last 10 years, customers used to borrow from us just around US$50. But now they are able to get about $10,000,” said Bun Mony, also the director general of Cambodia’s third-largest MFI, Sathapana. “How can we loan them so much money? After our assessment, we see that our clients can pay back these large amounts of money with interest and principle.”

MFI loans average at about $500. The industry has about $570 million in outstanding loans to 1.1 million customers. Prasac, the country’s biggest MFI, had a default rate of 0.14 per cent, the company’s director told the Post last week. About 30 per cent of the MFI’s loans go to the agriculture sector. Kalyan Mey, a senior advisor to Cambodia’s Supreme National Economic Council, as well as an outspoken critic of high microfinance interest rates, told the Post last week that, with up to 50 per cent annual interest on some loans, the potential for default among the Kingdom’s rural population was high.

A lack of understanding among rural debtors could lead to social instability and a loss of property, Kalyan Mey said at the time.

“[The interest rate] is too high to justify any productive gain from the farmer raising pigs or growing rice,” he said.

“At the end of the day, many farmers will lose their houses and their land. It can become a big social problem for the rural community.”

Son Koun Thor, president of the state-owned Rural Development Bank, said last week that free-market forces had left the rural borrowing population at a disadvantage in terms of interest rates.

At many MFIs, rates have fallen from an original monthly 5 per cent to between 2 and 3 per cent. Sathapana’s interest rates are about 25 per cent a year, according to Bun Mony. Prasac’s rates are slightly lower.

Some insiders, however, have said the rates could climb again as more MFIs start to take deposits.

Depositors would demand higher savings interest rates from the institutions, which before 2010 were only permitted to give small-scale loans, a source familiar with the industry told the Post last week on condition of anonymity. “The spread between deposits and loans will only increase,” the source said.